Wednesday, July 4, 2012

Music Industry Special : Different types of record deals...

Different Types Of Record Deals

There are a multitude of different deals out there for any recording
artist. It depends solely on what you agree to contractually. There is
no such thing as a standard contract-- a contract is just an agreement
between two people that says who will do what by when, what happens if
they do not do it, and how everyone gets paid. You don’t get what you
deserve in this business, you get what you negotiate.

It is important to have an entertainment attorney finalize your deal (or
negotiate it if you are not skilled in this area--I have done numerous
deals and still always have a lawyer by my side in every deal) because
it isn’t always what’s written in a contract that can hurt you, but
often what is missing. Every contract is different because every
situation is different! Recording contracts are always, always, always
set up to benefit the label and not the artist, so many changes are
needed. In fact, I once heard that the average contract goes back and
forth in negotiation seven times.

If the label has experience with you or your attorney, they know what
basics will be accepted and what will be rejected quickly, so they often
start with a better contract than someone who is brand new with no
experience. This is a business first and foremost, and people who are
out to make money from your talent, will try to do so at a split that is
as beneficial to them as possible.

I shouldn’t have to mention that a real record label or distributor is
one that has been putting out music successfully for awhile, has
relationships in the marketplace, and is well known. A record label is
not Little Bo Bo from down the block who thinks he’s a good judge of
music and linked up with the local dope boy or basketball player to
start a label. It is also not a website that appeared online last week
to sell your downloads and ringtones regardless of how catchy the name
is. The goal is not to be signed to just ANY record label, it’s to have a
successful career doing what you love to do: making music. This shit is
like winning the lottery to begin with, it’s important you learn as
much as you can and stack the odds in your favor as much as possible.

Here is an idea of the different types of deals out there, and these
deals are attainable based on the leverage of the artist, how badly the
label wants to sign the artist, who is on their team that the label sees
as added value, if other labels are bidding for the artist as well, and
the track record of success of the artist or producers:

Distribution Deal (sometimes called a P&D deal): This is the hardest
deal to get. It can be an 80-20 split, with the label making 20% and
the artist making 80%. There is rarely money advanced (in a few cases I
have seen pressing costs advanced). This deal is usually reserved for
the most successful artists where the label perceives minimal risk and
sees value in allowing the artist to do the bulk of the marketing,
promotion, radio, and video work. Cash Money has this type of deal, as
did No Limit back in the mid-90s at Priority. The only thing the label
is responsible for is getting the CDs into stores and collecting the
money. The artist does everything else. The length of the deal usually
runs 3 years and rarely, if ever, goes to an artist without the proper
funding and experienced team already in place. The artist always owns
the masters.

Joint Venture Deal: This is also a deal that is not easily forthcoming
without a track record of success. It is usually a 50-50 split, and the
term can run from 3 to 7 years. Most labels split the work with the
artist but offer the sole funding for the deal. There can be an advance,
which is always recoupable before the splits, and it is up to
negotiation whether the label owns the masters or splits them with the
artist.

Artist Deal: By far, this is the most popular and common record deal.
The label does everything, except record the album (although they pay
for it), and they have complete control and ownership. The term is
usually for 5 to 7 years, and the average percentage for the artist is
12%. Out of that percentage the artist pays back everything the label
spends that is recoupable, rarely leaving the artist any money unless
the sales are exceptional (Gold or better)

All labels are not created equal. Just getting signed to a label is not
enough. In fact, if you are happy solely to get a deal with a label, any
label, you are doing yourself a huge disservice--you are setting
yourself up to fail, unless you are just a lucky muthaphukka (in which
case, play the lottery and stay out of the music business).

Some labels are great at radio, some are great at working the streets,
some excel at making connections into film and TV or have great
relationships with BET and M-TV, and some have great connections with
the top producers and mixed tape DJs. If you make outstanding radio
songs and you do a deal with a label that has a weak radio department
with no budget to pursue radio play, you are screwed and your career
will falter. Each label is different, and it is important to know those
differences as you are building a career in the music business. Just
getting a deal, is not enough to guarantee success (not that anything in
this fickle business can be guaranteed, but you want as much of a
fighting chance as possible). And the labels change, as the people who
work for them come and go.

I have played a role in helping to build MANY millionaires in this
business (Cash Money, David Banner, Twista, etc). I feel my key to
success has been in studying the labels, knowing the abilities of their
employees and various departments (which are constantly changing), and
really seeing who is able to do what, well. Then, when I am shopping a
deal, I link up the artists with the labels that make a good fit. I make
sure that the artist is covered by outside consultants in the areas
where the label is weak. For example, if a major label is strong at
radio but weaker on the streets, I make certain it is in the artist’s
contract to hire their own street promotions team along with the budget
to do so.

With some labels, it is impossible to do this, so I make certain that I
never do deals with those labels—they are not the successful labels
anyway, so nothing is lost. Some labels are in business to make a
certain percentage back above the investment they outlay to keep their
investors or stock holders happy, so they are not interested in driving
their artists platinum. Perhaps their business model is to spend no more
than $500,000 on the creation, marketing, and promotion of any rap
record, and then their goal may be to make back $750,000. It would
follow that they would never spend more than half a million dollars and
as soon as they achieve their sales goal, they would stop working the
project and move on to another project. This is great for artists who
don’t have a chance of selling a lot of CDs, but frustrates most artists
who feel they can sell more than 100,000 CDs (after all, for a label to
make $750,000 all they have to sell is 100,000 CDs).

Some labels spend millions of dollars to promote their artists without
knowing what is effective, so their motto is spend, spend, spend. For an
artist who desires fame and doesn’t care about making money, this would
not necessarily be problematic. I imagine this is why we see so many
broke artists on VH-1 “Behind The Scenes” specials, because they weren’t
aware of ways to turn that fame into income for themselves.

Then, there are labels that change their staffing, or change their
ownership or change the original teams that had made the labels
successful in the past. This is why labels such as No Limit, Ruthless,
Loud, Death Row, etc could be on top one day, and struggling to compete
the next day. One thing is for certain in this business: success is
created by hit records and hard work. There is no other route to take.
It is impossible to have one without the other to succeed.

The industry is driven by radio right now. This means that the days of
Master P selling millions of CDs without any radio play are over. Today,
a run-away radio hit is almost a necessity to succeed. But in addition
to a hot single, it is important to have a realistic budget and a
well-connected team to follow up with strong radio promotion. Radio is
just one piece of the pie in creating a successful project. Even though
radio is key these days, it is not enough, by itself, to succeed.

Here are some of the things I look at when analyzing a major label:
• Who is running the label? Have they had success before? With what kind
of artists? With what kind of music? What and when was their last hit?
Do they appear to know what they are doing? Have artists left that label
to blow up elsewhere? Are the current artists happy? Do they have a
stockpile of artists just sitting still waiting to come out?
• Who runs the radio department? What records do they currently have at
radio? Who are the priorities at radio? Which stations do they seem to
have great relationships with? Which indie promoters do they hire?
• What other artists are signed to the label? What is their release
schedule? Who are the priorities and will my artist be a main priority?
• Is the label good at the type of music my artist makes? Do they offer
good artist development? Do they get a lot of press for their artists?
Is the marketing staff strong? Does the staff have a good reputation?
Does the staff turn over quickly or is it a good working environment?
Does the person running the label give their staff the autonomy to do
what they are hired to do?
• Is the bulk of the label’s staff an A-List staff or is it comprised of
folks who are new to the business or the folks who could not get jobs
anyplace else (a sign that the label is overly cheap and has no clue how
to succeed)?
• Does this label share our goals and ideas of success? If I am planning
to take my artist Platinum and/or do a ton of endorsement deals, we
better not sign with a label that only has a history of selling 300,000
CDs on every twentieth release, while barely breaking 75,000 in sales on
most releases.
• Do they sign the majority of hot acts around the country or do all of
their acts seem to come out of nowhere? If they are signing the hottest
acts, do they become one hit wonders or do they have legitimate careers?
• Are their deals fair or are there a lot of disgruntled artists slamming them publicly?

I am not any smarter than you. My connections are not great. I just
study this industry under a microscope and place artists with the labels
that appear to make sense for that type of artist. So far, it has
worked! And, if I can do it, you can do it. So before you take a deal,
just any deal, make sure you understand exactly what you are getting
into. Do the research and make certain the company to which you are
giving the next five to ten years of your life, is worthy. Most are not.
The real work begins once you get a deal, so make sure you have as much
stacked in your favor as you can!